The Determinants of the Growth of Multinational Banking Organisations: 1972–86

Abstract

This chapter attempts to estimate empirically the factors associated with the growth of total assets of the world’s largest banks. In particular, it attempts to determine the extent to which observable economic variables, including changes in the exchange rate of a bank’s home country currency, affect the growth of bank assets. Understanding the economic factors influencing bank asset growth is important because asset growth is sometimes thought to be a goal of bank management and may be cited as evidence of competitive advantages or disadvantages affecting certain banks or the banking industry vis-à-vis other financial intermediaries, and because bank asset growth is of concern to bank regulatory authorities and legislators.

Our goal is to become the world’s largest and strongest comprehen­sive financial service institution. (Dai-Ichi Kangyo Bank, 1985)

International league standing became a key strategic objective for many banks in the 1970s, measured by total asset growth … (Benjamin J. Cohen, 1986)

The views expressed in this paper are those of the authors and should not be interpreted as representing the views of the Board of Governors of the Federal Reserve System or its Staff. We wish to thank Neil Ericcson for comments and suggestions, and Shane Grady and Kim Coleman for valuable research assistance.